What To Expect In A Post Foreclosure Lawsuit And How To Get Rid Of It Prior To Trial

By the time that a client is on the phone with me, he’s already exhausted every chance at a cash-for-keys deal. The client is usually frustrated, anxious and upset. Why not? The client has put up hundreds of thousands of dollars for real estate that he can’t use or sell because the prior property owner won’t leave. Worse, the prior owner has filed suit against everyone-the bank, the trustee, and the purchaser at foreclosure (my client)-and recorded a lis pendens against the property. Thinking that they have all of the leverage, I’ve seen prior owners demand as much as $80,000.00 to turn over the keys and vacate property that they no longer own and have no right to occupy. Other foreclosed out owners that I’ve encountered have been more base, insinuating that if cash-for-keys isn’t paid they’ll strip the place. My experience in foreclosure litigation since 2008 has taught me that “cash-for-keys” is a euphemism, a polite way to say extortion.

My clients are smart business people. They come to me only when it’s time for the nuclear option. They have found in the foreclosed prior owner one who is desperate, unreasonable, and greedy; a person who is addicted to free housing, bent on dragging things out, and marked my client for a shake down. Before suing my client, the prior owner may have already utilized a credit-busting bankruptcy to delay foreclosure only to later suffer the foreclosure where my client bought. Thus, the prior owner doesn’t fear adding an eviction to his credit report to complete the deadbeat trifecta. I advise that the only way to deal with such a person is to hit him hard, dispel any hope in his mind of benefitting, and begin handing him a series of in-court defeats that will eventually result in him waiving the white flag.

First, get an eviction case going. I have my office serve the prerequisite notices on the prior owner that day. Four days later, I file an eviction case against the prior owner. Second, on the day that I get hired, I set a hearing date for a motion to expunge the lis pendens. Third, I begin preparation of my demurrer to the prior owner’s complaint seeking to have the court throw out the case. Fourth, I have contact with the prior owner or his attorney and withdraw all cash-for-keys deals. This contact may be more symbolic than anything else since it’s unlikely that any such offer is pending at the time. But I make contact anyway to emphasize to the prior owner (or his attorney) that there’s no money for the case and to deliver my lecture that he should be ashamed of himself for filing such a frivolous suit against an innocent buyer at foreclosure.

The way matters are now scheduled where I practice in San Diego, the prior owner’s first citadel to fall is possession. In other words, the prior owner loses my client’s eviction case. Naturally, the prior owner does all that he can to delay the case (another bankruptcy during the pendency of the eviction case is not out of the realm) by requesting continuances, taking the case to trial rather than settling, and staying in the property all the way to lock out. But the sheriff will enforce the eviction judgment and throw the prior owner off the property. Depending upon the prior owner’s degree of obnoxiousness and greed, attending the lock out can be a gratifying moment for both attorney and client. Getting possession is a big victory for my client because he can now start preparing the property for sale or rent so he’s no longer losing any time.

While the eviction case is pending, I also recommend to clients that they periodically check on the property and look for any signs of stripping by the prior owner. If the prior owner is taking out fixtures or otherwise damaging the property, I recommend that clients contact me at once so that I can go into court immediately and obtain a restraining order. Because stripping has become so commonplace during the foreclosure crisis, the courts where I practice tend to be very liberal about issuing restraining orders to stop stripping.

The next loss for the prior owner is expungement of his lis pendens. With the lis pendens gone, my client now has clear title. Coupled with the win in the eviction case, my client has achieved at that point possession and the ability to transfer the property free and clear. The court’s ruling expunging the lis pendens is often followed by a loud hissing noise. This hissing noise is the sound of the air going out of the prior owner’s case. The court’s ruling expunging the lis pendens is a serious blow to the plaintiff because it’s an implied rejection by the court of the prior owner’s case and a foreshadowing of plaintiff’s failure at trial. (See my post regarding lis pendens for a further explanation of this point).

The coup de grace is the demurrer. Recall that the demurrer is a motion that challenges the legal sufficiency of the plaintiff’s complaint. There are some limitations to demurrer that you should know about. First, in deciding the motion, the court is limited to the four corners of the complaint. What that means is that the court will not consider any evidence when ruling on the demurrer. The court only looks at the complaint. The sole issue in a demurrer is whether the allegations of the complaint state a legal claim not whether the plaintiff can prove them. Thus, to prevail on a demurrer, the complaint itself must be defective in its allegations; shortcomings in evidence aren’t considered.

The other limitation is that when the court grants the demurrer it can do so “with leave to amend.” In other words, the court will give the plaintiff another chance to plead his case to see if he can plead a good claim. Thus, it usually takes at least two demurrers before the court will grant the demurrer “without leave to amend” (the ruling that I’m after) which means that the plaintiff’s case is done. However, the court, in its discretion, can allow the plaintiff more than one chance to amend. Thus, it’s possible to be stuck in demurrer hell where you’re winning each demurrer but the court keeps giving the plaintiff chances to amend. The upside to the demurrer, though, is that it’s the fastest (and least expensive) way to get rid of a bad case. In San Diego, civil cases take around fourteen months or so from filing to trial. If my client prevails on demurrer, however, he can be out of the case in about four months.

In my experience, particularly when my basis for the demurrer is the tender rule (please see my post on California’s tender rule), the judges in San Diego don’t allow many chances to amend. In fact, in my cases where I demur on the ground of the tender rule, the judges have only given the plaintiff one chance to amend before giving the case the boot. But each case is different. I’m able to tell after reading the complaint whether my client should file a demurrer.

Some cases may not be good for demurrer because the plaintiff alleges a good claim although he probably can’t prove it. In those cases, I would advise bypassing demurrer for a pre-trial motion called a motion for summary judgment. A motion for summary judgment is the mother of all motions. It’s essentially a trial in writing. If my client wins the motion, he wins the case. And, unlike a demurrer, the plaintiff must prove up his case in writing. The court considers evidence, not just the complaint’s allegations. The downside to a summary judgment motion is that it can get pricey. The upside to a motion for summary judgment is that it resolves the case sooner and prior to trial. Thus, a motion for summary judgment can actually save money in the long run because it dispenses with the need for an expensive trial.

A good lawyer can determine whether to go the demurrer or summary judgment route. I tend the favor demurrer because I want to keep the pressure on the plaintiff and I want to keep handing him losses. Remember, the plaintiff’s strategy is to delay. It is common for the plaintiff, therefore, to be constantly asking for continuances. Plaintiffs in post-foreclosure cases will also try to create discovery disputes as a way to delay. The judges that I practice in front of tend to see through plaintiff efforts to delay in post-foreclosure cases and customarily deny continuance requests and show impatience toward discovery disputes. Thus, by the time of the demurrer, the plaintiff has probably already lost at six or seven hearings and is getting dispirited. I don’t like to give up that momentum so I will recommend demurrer if I see a good ground for it. So, if you are an investor in real estate who has been sued, there are ways to get the litigation out of your hair fairly quickly and get on with enjoying return on your investment.

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About howardfburnsI am a foreclosure litigation and landlord/tenant attorney in San Diego, California. I have been an attorney in San Diego, California for 29 years during which time I have represented landlords, property management companies, real estate investors, and secured creditors in hundreds of litigated cases.
Howard F. Burns, Esq.
Law Office of Howard F. Burns
8880 Rio San Diego Drive, Ste. 800
San Diego, CA 92108
(619) 243-1757 (Telephone)
(619) 297-1497 (Facsimile)
howardfburns@gmail.com (Email)
www.lawofficeofhowardfburns (Website)

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